Competition, Innovation and Growth with Limited Commitment

Marimon, Ramon; Quadrini, Vincenzo

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Competition, Innovation and Growth with Limited Commitment

CEPR Discussion Paper No. 5840

40 Pages Posted: 16 Nov 2006

See all articles by Ramon Marimon

Vincenzo Quadrini

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: September 2006

Abstract

We study how barriers to competition - such as, restrictions to business start-up and strict enforcement of covenants or IPR - affect the investment in knowledge capital when contracts are not enforceable. These barriers lower the competition for human capital and reduce the incentive to accumulate knowledge. We show in a dynamic general equilibrium model that this mechanism has the potential to account for significant cross-country income inequality.

Keywords: Contract enforcement, human capital, economic growth

JEL Classification: L14, O4

Suggested Citation: Suggested Citation

Marimon, Ramon and Quadrini, Vincenzo, Competition, Innovation and Growth with Limited Commitment (September 2006). CEPR Discussion Paper No. 5840, Available at SSRN: https://ssrn.com/abstract=945410